Whether sponsorship expenses shown in Financial account attracts Service Tax.

[samiuddin ansari]

Sir,

One more query is required to clarified as to whether sponsorship expenses shown by any firm in their Financial account attracts service tax liability. However, it has been shown in the firm's expense side incurred owing to fees and other relevant expenses for education purpose of children i.e family members admitted in the foreign university. Solicit your necessary valuable guidance on the matter with supportive case laws, circulars, instructions etc. by Board, if any.

[KASTURI SETHI]

Dear Querist,

Sponsorship services were brought under Reverse Charge Mechanism vide Notification No.30/12-ST dated 20.6.12. Expenses shown in Profit & Loss Accounts mean you have made payment to the Service Provider on account of receipt of sponsorship service. Hence it attracts ST and 100 % liability is cast upon Service Receiver.

[samiuddin ansari]

Sir, my contention is the expenses shown above pertains to other than business purpose which will not be used in or in relation to manufacture or provisions of services either directly or indirectly in any manner and also not for some consideration whether in monetary or non-monetary form. Need more clarification on this aspect supported with case laws or clarification by Board, if any.

[KASTURI SETHI]

Dear Querist,. The question of using "in or in relation to " comes later. Expenses indicate you have received service which is under RCM. You may not be able to use in taxable output service. That is a separate issue.Regarding the 'element' of consideration, there is no '''free lunch". You understand well, being a knowledgeable person.

[KASTURI SETHI]

Is firm not a body corporate ?

[samiuddin ansari]

Sir, the above firm is registered private limited company.

[KASTURI SETHI]

As per Section 2(11) of the Company Act, 2013, a Pvt. Ltd. Company is body corporate. Hence RCM applicable. As per Rule 2(p) of the Cenvat Credit Rules, 2004 is not an output service. No doubt about applicability of Service Tax on recipient of service.

[YAGAY andSUN]

Service Tax under Reverse charge was applicable on sponsorship services.

AI Summary

Sponsorship Expenses for Overseas Education Subject to Service Tax Under Reverse Charge Mechanism, Says Notification No.30/12-ST. A discussion on whether sponsorship expenses recorded in a financial account attract Service Tax under the Reverse Charge Mechanism (RCM). The query involves expenses related to educational fees for family members studying abroad. One participant clarifies that sponsorship services fall under RCM per Notification No.30/12-ST, making the service receiver liable for the tax. Another participant argues that these expenses are unrelated to business activities and do not involve consideration. The discussion concludes with the affirmation that a private limited company is a body corporate, thus making RCM applicable to sponsorship services.